IDC predicts crisis will kill some PC makers

With credit in a tight squeeze and the economy in free fall, the next few years should see the collapse of some small PC makers and a restructuring of the rest of the industry, according to an industry research firm.

Richard Shim, personal computing research manager at IDC, told Computerworld that he expects a consolidation of the market. However, he doesn't think that the big PC players, like Hewlett-Packard, Dell and Acer, will gobble up smaller hardware vendors. Instead, he says, those smaller players will simply fold up shop as the faltering economy keeps companies and individuals from buying new computers.

"It won't be so much about acquisition but the smaller players will just go away," says Shim, adding that he thinks the industry could lose fewer than 10 companies. "The big players are feeling the hurt as well. Right now, everybody is beating each other up in price. If some are going to die off anyway, what's the sense in buying them?"

IDC earlier reported it is projecting that worldwide PC sales will quickly drop off because the sagging economy is causing people to hold onto their savings while credit is unavailable (see below).

Shim notes that he thinks MPC kicked off the consolidation early in November when the PC maker filed for bankruptcy. In mid 2001, the business was sold by parent company Micron Technology, and later changed its name from Micron Electronics to MPC. A little more than a year ago, MPC bought Gateway's professional business division.

And MPC won't be the only mid- to low-tier PC maker to fall, according to Shim. He says 2009, 2010 and maybe even 2011 will be tough years for the industry.

Just a few weeks ago, iSuppli Corp. slashed its 2009 growth forecast for worldwide PC shipments by nearly two-thirds because of the deteriorating economy. The analyst firm is now projecting that worldwide PC shipments will rise by 4.3% in 2009, down from its previous forecast of 11.9 percent growth.

ISuppli's adjustment to its PC forecast came on the heels of the firm downgrading its estimates for global semiconductor revenue for the year. The researcher projected that 2008 semiconductor sales will decline by 2% to US$266.6 billion (NZ$498 billion), from about US$272 billion in 2007.

Shim says the economic crisis likely will reset many vendors' business models.

"If you change selling prices, you need to find new ways to do business, like skimping on quality or coming out with new models," he explains. "A lot depends on how drastic the situation gets."

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